Volume 5 Number 1,
December 2017

This edition of the Ghanaian Journal of Economics continues in the tradition of the
previous volumes. The studies published cover a wide range of topics that deal with
pertinent problems across Africa and other regions of the world and the outcomes
have wider implications for practitioners and policy makers. The topics range from
the link between economic growth, poverty and inequality across developing regions
of the world; the impact of construction expenditure on economic growth; the
consequences of financial development and external debt on economic growth; the
innovative role of knowledge-intensive business services on economic diversification
in Nigeria; and the analyses of household choice of safe drinking water in Ghana.

This paper uses data on countries in sub-Saharan Africa (SSA), South and East Asia
(SEA), and Latin America and Caribbean countries (LAC) to examine the impact
of economic growth on income and human poverty, and assess the role income
inequality plays in that relationship. Unlike previous studies, we use System GMM
estimator which addresses the endogeneity problem associated with dynamic panel
data analysis. We found that in general economic growth has led to reduction in
both income and human poverty levels in all the three regions. The reduction in
income poverty is greater in SEA than in LAC and SSA, while the reduction in
human poverty is greater in SSA than in LAC and SEA. We also found that the
positive impact of economic growth on poverty reduction is higher when income
inequality is low. Finally, the results showed that economic growth has significantly
reduced inequality in SSA, increased inequality in LAC, and has no significant effect
on inequality in SEA.

Does construction expenditure matter in economic growth, and does the Bon curve
hold in sub-Saharan Africa (SSA)? This paper answered these questions by reexamining
relationship between construction expenditure and economic growth for
33 countries in SSA using an annual data spanning from 1990 to 2014. The main
estimation techniques employed were the Panel Autoregressive Distributed Lag
(ARDL) model and the Dumitrescu Hurlin Panel Causality test. The results revealed
a positive relationship between construction expenditure and economic growth both
in the long run and short run, although the latter was statistically insignificant. There
was also a non-linear (inverted U-shaped) relationship found between construction
expenditure and economic growth with a turning point of 11.28%, suggesting that
the Bon curve holds for SSA. The study further showed a bidirectional relationship
between construction expenditure and economic growth, at least for a four-year
lag period. These findings highlight the importance of the construction industry to
economic growth in SSA and hence, the study recommends that policy makers and various governments in SSA need to devote a large share of output to propping up the
industry since the multiplier effect is very large for developing countries. Moreover,
policymakers in SSA need to be circumspect in controlling the level of construction
expenditure in the long run because expansion of construction expenditure beyond
the turning point may not bring the desired impact on economic growth.

This paper analyses the effect of financial development and external debt on Ghana's
economic growth. Low financial sector growth coupled with inability to find
innovative ways of generating domestic revenue in developing countries has led to
increasing reliance on external borrowing for development finance. Over the recent
past, Ghana has resorted to the issuance of bonds and other non-concessional loans,
leading to rising debt ratios. Using the Autoregressive-Distributed Lag technique
on time series data from 1970 to 2015, we find that external debt has a negative
effect on Ghana's economic growth. On the other hand, financial sector development
has a positive effect on growth. We also find a one-way causality from financial
development and external debt to economic growth.

The study sought to examine household’s choice of safe drinking water in Ghana.
Access to safe drinking water has over the years become a major social problem
which in essence has implications on the health of the people. The multinomial
logistic model was used to examine the covariates of source of safe drinking water
among households as the unit of analysis. The Ghana Living Standards Survey Round
Six (GLSS 6) data was used for the analysis. The study revealed that demographic
and socio-economic characteristics influence household choice of safe drinking
water. It emerged from the study that household’s size, wage income and possession
of assets have positive significant effect on household’s choice of safe drinking
water. Accordingly, conscious efforts should be made by authorities to concentrate
on implementation of strategies and schemes directed at providing and expanding
access to safe and reliable drinking water.

This study investigates approaches to market innovation by Knowledge-Intensive
Business Services (KIBS) for economic diversification in a developing economy,
based on the Resource-Based View (RBV). A framework is built in which KIBS
employed invention, extension, duplication and syntheses approaches for market
innovation to diversify. A survey was carried out in Lagos, Nigeria with the
sample consisting of 1788 KIBS and analysed using Principal Component
Analysis, Pearson-Moment correlation and multiple linear regressions. The
findings indicate that the four approaches are significantly related to market
innovation; however, duplication is the most frequently used. The results would
assist in framing programs to encourage market innovation by KIBS in developing
economies.